Robinhood, a crypto-friendly broker, will pay $70 million to settle a dispute with the U.S. Financial Industry Regulatory Authority (FINRA). It is the largest fine ever imposed by the regulator.
JUST IN: We have fined Robinhood $57 million and ordered the firm to pay approximately $12.6 million in restitution, plus interest, to thousands of harmed customers.
Learn more ▶️ https://t.co/h0s18ZAEtA
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— FINRA (@FINRA) June 30, 2021
Of this amount, $57 million is the fine the firm will pay to the regulator. Another $12.6 million Robinhood will pay to affected users as restitution.
The broker reached a settlement, but did not admit or deny the allegations. As FINRA stated, the company “agreed with the regulator’s findings”.
FINRA stressed that the size of the sanctions reflects the seriousness of the firm’s misconduct. According to the regulator, since 2016 Robinhood “negligently provided clients with false or misleading information.”
“[The misinformation] concerned a range of key issues related to clients’ participation in margin trades, the amount of cash on user accounts, purchasing power or ‘negative purchasing power’ of clients, the risk of loss of funds when making certain option trades, and the likelihood of a margin call,” according to FINRA’s statement.
The regulator noted frequent technical outages in the app from 2018 to 2021. The most serious incident FINRA highlighted was the outage in early March 2020.
FINRA also stressed that Robinhood concealed important information from the watchdog. In particular, it did not notify the agency of “tens of thousands” of customer complaints.
Earlier Robinhood valued the settlement with FINRA at $26.6 million.
Earlier reports indicated that Robinhood delayed its planned June 2021 IPO due to the U.S. Securities and Exchange Commission examining its cryptocurrency business.
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